Just like when seeking a merchant loan, credit experts strongly advise that you compare your options carefully before placing a finger on the business credit card to use for your company. Therefore, the best credit card for your small business depends on your business’s needs. The most common commercial credit card types are unsecured, secured course, and prepaid business credit cards.
Discover the differences between these three card types below.
1-Unsecured Business Credit Card
Unsecured credit cards like unsecured loans are issued by card providers, e.g., Visa, American Express, or MasterCard to offer retailers a collateral-free line of credit.
Your line of credit here depends on your history with debt and your credit score. So unless you past show that you make timely repayments, card issuers may consider you too high risk to give an unsecured business credit card.
Retailers who are still not eligible to unsecured business credit cards should check alternatives to help them build their FICO scores.
2-Secured Credit Card
Credit card firms only give secured business credit cards to micro-business owners who agree to provide some collateral—most times, a cash deposit. This is the card issuers’ way of ensuring they recoup payments in the event you are unable to clear your credit card bills. And like with unsecured cards, lenders decide your borrowing cap based on your FICO score.
Just like any other credit card, secured cards need the same level of dedication to making on-time payments and ensuring responsible use of the card. The consequences of failing to meet or matching up to these requirements will reflect on your credit score.
3-Prepaid Business Credit
Prepaid business credit cards function more like debit cards— and it is the only credit card most long-time borrowers will warn you to keep off.
These cards won’t boost your score, but they also won’t negatively impact on it, because the goings on of prepaid cards aren’t reported to bureaus. What’s more, these cards come with preloaded borrowing caps decided by the card issue, which means you have limited access to credit.
You can use your prepaid card pretty much anywhere because they usually carry logos from leading credit card companies, e.g., Visa or Mastercard.
For small businesses that require several contractors or team members to make payments, prepaid cards are a safer alternative to cards linked to business checking accounts.
Evidently, all the cards are excellent for business owners. However, each card has its own ideal uses for different situations. Therefore, the decision to pick any of the cards will squarely depend on the financial goals of your business.